These Low-Risk Stocks Could Be A Profitable Answer To This Volatile Earnings Season
Slow and steady performers do better over the long term. Stocks have become more volatile after they report earnings. Long-term investors can try to exploit this greater volatility, but shorter-term investors will want to favor lower-volatility stocks in the coming months.General Motors is a good example - the stock jumped 15% after its earnings report on Oct. 21. Netflix shares fell 10% after it missed earnings on Oct. 22.Consider the performance of a hypothetical portfolio that buys the 10% of stocks with the highest betas and sells short the decile of stocks with the lowest betas. As you can see from the chart below, this portfolio makes money on average during the busiest weeks of earnings season - and is a slight loser the rest of the time. The data in the chart come from a study entitled "Asset Pricing on Earnings Announcement Days," published three years ago in the Journal of Financial Economics.
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